Young children don’t usually grasp the general concept of money until somewhere between the age of 3 and 4. So they expect to get whatever captures their fancy and expect you to get it for them, like picking fruit from a tree. It’s there, and I want it, so pick it for me mom!
But you can begin teaching your kids early on the value of a dollar and the importance of saving money. According to WC Randall of Edward Jones Investment, take your next bank visit as an opportunity to teach them the concepts of a bank and what you are doing with your money. Make things simple. Take the following short explanation as an example:
The nice people that you are giving the money to are called “tellers.” Then when you give the money, tell them that this is called a “deposit.” The money you are depositing to the teller is placed in a “checking account” or a “savings account” to keep it safe. This is so that mommy doesn’t have to carry a lot of money with her all the time.
Explain to them that the money that stays in the savings account earns interest and becomes more money. Mommy’s plan for how to save and spend that money is called a “budget.” Tell them that if you follow this budget, you can be sure that there is enough money for you to use on things you need to buy and pay for. If you save more, it means you can possibly afford more in the future, like splurging a little on your budding fashionista’s No Slippy Hair Clippy collection!
It might not be easy for kids to grasp right away, but it will be helpful for them to become familiar with the words that are commonly used:
Deposit- to put money into an account
Withdrawal - to take money out of an account
Teller - the person who takes deposits and withdrawals
Savings Account - an account where money is left to accumulate interest and grow
Interest - the money earned by the money in a savings account
Checking Account - an account where money is deposited and that checks draw from
Budget - a plan for saving and spending money